“Living Benefits” has become the phrase for companies marketing Critical Illness insurance plans and rightly so.
But what exactly are living benefits and what is making them so popular as insurance products? Generally people only considered protecting their family in the event of their passing. With the advancement in medical technology we generally survive an event that used to take our life.
Imagine someone has a Life Insurance policy with a $500,000 death benefit. This will pay a benefit on their passing but what if they survive a heart attack or are diagnosed with cancer? They are going to have a drastic change in lifestyle and income for a lengthy period of time. This is where the Critical Illness plans or Living Benefits come into play. The topics to follow will describe plans available in the marketplace, today, and their features and benefits.
According to statistics, you are much more likely to survive a critical illness than die, hence the need for a living benefits insurance plan designed to pay the policy holder with benefits in the event he continues living.
If you are an insurance agent or financial advisor, it is vital you advise your clients on the importance of living benefits in their insurance policies. You do not want to be at the other end of an upset family who cites you for failure to properly advise them on their insurance needs.
What are the different types of Living Benefits available in insurance policies?
Specified Disease Plan:
Cancer Plans: This type of plan is really the most popular. Cancer plans are designed to cover specific cancer conditions and related treatments. Based on the type of plan purchased one will either receive a lump sum cash benefit or will be paid on an indemnity basis. Both types of payment are explained further on in the article.
Heart Attack and Stroke Policy: This type of policy provides benefits in the event of a heart attack or stroke. When purchasing a heart and stroke plan it covers just that, a heart attack or a stroke. Each will have certain criteria that must be met so it is important the plan is reviewed carefully before purchasing. The benefit for a qualified condition is generally paid as a lump sum benefit.
Critical Illness Plans with Many Covered Conditions
Whereas Cancer Insurance and Heart Attack/Stroke Insurance are very specific to those conditions, there is another broad category of insurance that provides living benefits. This is your more comprehensive Critical Illness insurance plans which cover up to 18 different conditions such as kidney failure, severe burns, etc.
Critical Illness Insurance With A Death Benefit
We need to remember the reason for these plans, as a Living Benefit! Critical illness plans vary from carrier to carrier and some may provide a death benefit while some may contain a survival clause which requires that the insured survive the event for a set period of time before any benefits are paid. Some stand alone plans do not pay any death benefit. You need to check each policy and read the fine print.
Another plan uses a critical illness benefit built on a 10 or 20 year term life platform. You now have a combination of Life Insurance and Critical Illness built into one plan. This coverage terminates when a 100% benefit is paid to the insured. If no claim is filed the insured may choose to purchase the coverage again, with the understanding the benefit amount will change due to age or the premium will change if they choose to keep the same benefit.
Life Insurance With Living Benefits
There is a difference between a Critical Illness Insurance Plan with a Death Benefit and a Life Insurance policy with Living Benefits or Terminal Illness Rider. These are different plans altogether and you should understand the difference.
Different Methods of Benefit Payouts
Plans are available that will pay the benefit in either a Lump Sum or an Indemnity basis.